How Should Manufacturers Improve Their Distributor Relationships
By Tom Fournier
In a recent survey conducted by Baird Analysis on behalf of Modern Distribution Management, there was an interesting “Rotating Question” which garnered distributor responses. The question was: “From your perspective, what is the biggest thing manufacturers could do better at to reduce friction in the distributor-manufacturer relationship?”
I thought I would highlight and comment on several of the ones that jumped out at me and offer a few more based on my experiences working as a manufacturer that sold through distribution and my consulting work with a number of distributors.
- Collaborate on problem resolution. This seems so simple. But when I see “problem”, I read conflict. Conflict is difficult for all parties to manage. The worst way to do it is a late Friday afternoon email dump. Ouch! That will blow up. Also, I have seen too many of these escalate through exchanges of emails. If it is sensitive, pick up the phone and call! If it is very serious, be proactive and get the most appropriate senior leaders involved so they can come to a resolution and cascade this down through their organizations. Hiding from a problem is not going to make it go away! Prolonging the resolution can mean hard feelings that will be difficult to overcome.
- Collaboratively Build Annual Growth Plans. Another simple and practical step that is seemingly not all that common! This applies to significant partnerships. Not only build the plan, but also set a cadence for joint business reviews that measure progress against the plan. If collectively you are not on target, then you need to adjust the plan or adjust expectations.
- Manage Price Increases – Limit Number of Times. Offer Proof Sources So Distributors Can Sell the Increase. A price increase needs to be sold through to a distributor’s customers. They do not have the margin to absorb manufacturer’s increases. If the manufacturer can provide indices showing input price increases, then there is a better chance the distributor can sell the increase with justifications rather than simply blaming the manufacturer for the increase.
- Limit Distribution. For a manufacturer, what is your strategy? Can everyone buy? Then you need to market the heck out of your products creating demand so that end user customers can source through their preferred distributor. Do you want to work in conjunction with distributor partners to develop business together? Then you need a plan to show that you respect distributors and the work you expect them to do on your behalf creating business opportunities for you!
- Product Information Ready for Ecommerce. Manufacturers need to give easy access to product specifications including weights and measures and sub-packs, product descriptions, suggested applications and product images and logos to support quality product listings on a distributor’s website/ecommerce portal.
- Leads and Qualified Opportunities. From what I experienced, if you have marketing resources then distributors assume you are generating leads and they never feel they are getting their fair share if any. You need to be able to discuss with distributors what your corporate approach is to lead generation and how they can participate. If you do not have a good approach, then consider developing a distributor specific program for important partnerships! (see video from Integrity Leads).
- Be Clear on Your Strategy Around Ecommerce Giants. If a manufacturer is busy creating listings with Amazon Business and making them a part of their distribution strategy, then it is important to be transparent with distributors around that shift in their distribution strategy. You need to set your strategy so that if a distributor meets you via an ecommerce platform in one of their customers, they are not at a significant price disadvantage!
- Make Sure Your Sales Team Understands a Distributor’s Financial Needs. For manufacturers, they need to make sure their sales organization and their product managers have a clear and proper understanding of the margins that a distributor needs to be able to operate profitably. I can not begin to describe the number of times that I heard a sales representative say “I gave them 10 points, that should be plenty!”
It continues to be a tough market with margin compression at all levels of the supply chain. A great opportunity to succeed in this environment is to build respectful and collaborative relationships with distribution!